Prof Garnaut, who is chairman of Ok Tedi Mining, was quoted by The Australian newspaper as saying that with such an accumulation of wealth in PNG, it was "tempting for political figures to think of better ways of using it right now rather than putting it into long-term development".

Mr O'Neill said Prof Garnaut's statement was not true and could damage his country's reputation.

"As a leader of the country I cannot stand by and allow comments like those to continue," he told reporters at the National Press Club in Canberra on Wednesday.

"It was irresponsible. He has to take ownership of that statement."

Mr O'Neill says his government has sought an explanation.

"Some of the explanations he's given to us are not acceptable to us," Mr O'Neill said.

Mr O'Neill has previously said Prof Garnaut, who until recently was also chairman of the PNG Sustainable Development Fund (PNGDF) trust, would not be allowed back in until control of the Ok Tedi mine was given back to the PNG people.

The trust was given ownership of the Ok Tedi mine, located in PNG's Western Province, by mining giant BHP Billiton.

Mr O'Neill claims BHP is running the PNGSDF by remote control from Melbourne and has questioned whether the 37-year-old nation had benefited from the project.

The prime minister on Wednesday reiterated his call for BHP to back off.

"There is no longer a valid reason for it to continue to exercise any control over the board appointments to that fund," he said.

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